Federal college loan program hurts minorities most

The accumulation of student debt has hit African-American and Latino students the worst.

A new study from the Washington Center for Equitable Growth mapped student loan delinquency rates and found that areas of cities with higher concentrations of African-Americans and Latinos had the highest delinquency rates.

Previous research from the Washington Center noted that students with lower levels of debt tended to have higher default rates and more problems repaying student loans, according toThinkProgress.

Higher debt levels correlated with more years of schooling; future doctors and lawyers spend longer in school, but high expected incomes make the high levels of debt manageable. Fewer years in school don’t give students as large of an income boost, so small levels of debt can wreck a budget.

It’s not only a matter of wealth, either. When researchers controlled for income, race still predicted delinquency rates. Middle-class African-Americans and Latinos suffer the most from delinquency.

The delinquencies hit harder than most realize; many students who owe debt didn’t complete a degree, and completion rates are lower for minorities.

While 63 percent of white students complete a four-year degree within six years, only 41 percent of African-Americans and 53 percent of Hispanic students do the same, according to the National Center for Education Statistics.

For two-year degrees, only 29 percent of white students complete a degree within three years, compared with 24 percent of black students and 34 percent of Hispanic students.

If those students opt to leave their degrees unfinished because they found gainful employment, those numbers aren’t worrisome. For many students, however, who don’t finish a degree, took out student debt, and then can’t find gainful employment to avoid loan delinquency, those patterns hit the poor and young minorities most.

“The college enrollment gap between whites and minorities is narrowing, but the college completion gap is not,” Marshall Steinbaum and Kavya Vaghul noted for the Washington Center.

Perversely, access for minorities is improving, but completion rates are not. With lower levels of household wealth to weather the debt burden, minorities students are left in a difficult situation, even though expansive access to federal financial aid aimed to give all students a path toward social and economic advancement.

Those unintentional effects have driven some calls for higher education reform. A report from the New American Foundation has advocated the abolition of federal aid in favor of formula-funded grants and a renewed focus on lowering costs, among other ideas.